Aria is investing $6,700 of her savings from her summer job for her college fund. She is planning to invest the amount for 3 years and can choose between simple interest at 6.5% and compound interest at 6%. Find the difference between the two interest earning types to help Aria decide which investing option is best for her.(1 point)

Question

Aria is investing $6,700 of her savings from her summer job for her college fund. She is planning to invest the amount for 3 years and can choose between simple interest at 6.5% and compound interest at 6%. Find the difference between the two interest earning types to help Aria decide which investing option is best for her.(1 point)
Responses

GPT 3.5 · Answer

To find the difference between the two interest earning types, we need to calculate the interest earned for each option and then find the difference.

Simple Interest:
Interest = Principal * Rate * Time
Interest = 6700 * 0.065 * 3
Interest = 1303.50

Compound Interest:
Interest = Principal * (1 + Rate)^Time - Principal
Interest = 6700 * (1 + 0.06)^3 - 6700
Interest = 808.20

Difference = Compound Interest - Simple Interest
Difference = 808.20 - 1303.50
Difference = -495.30

The difference between the two interest earning types is -$495.30. This means that Aria would earn $495.30 more in interest by choosing the simple interest option over the compound interest option.